Modi's BJP makes big gains in Indian state polls

Musicians play instruments in front of the portrait of Indian Prime Minister Narendra Modi, outside the Bharatiya Janata Party (BJP) party office in Mumbai October 19, 2014. REUTERS/Danish Siddiqui

NEW DELHI (Reuters) - Prime Minister Narendra Modi’s Hindu nationalist party has made big gains in two Indian state elections, results showed on Sunday, an endorsement likely to encourage him to step up the pace of economic reforms.

Modi’s Bharatiya Janata Party (BJP) was set to win 122 of 288 seats in Maharashtra. This more than doubles its seat count in the western state, which is home to the financial hub of Mumbai, but falls short of an outright majority.

The BJP won 47 of 90 seats in Haryana, which borders the capital, New Delhi - enough to rule alone.

State elections determine seat shares in the upper house of parliament, where the BJP and its allies lack a majority. The BJP hopes for gains in a clutch of state polls between now and 2017 to get towards the majority it needs to pass most legislation without help from the opposition.

The 64-year-old Modi, a gifted stump orator, hit the campaign trail hard. He will be able to reap capital from the victories even though the BJP did not achieve its ambition of winning enough seats to rule Maharashtra alone.

“There is still a Modi wave that is like a tsunami,” BJP president and Modi campaign manager Amit Shah told reporters after most of the seats had been declared.

“Today’s results give a seal of approval to the Modi government over the past four months, and prove that our countryfolk recognise Modi as an undisputed leader of India.”

Though the results represent major gains for the party since the last state elections, the BJP’s share of the vote in both Haryana and Maharashtra was just down from the May 2014 general election, when it won the first outright majority in 30 years.

Both states, which voted on Wednesday, were formerly bastions of the Congress party that has long dominated Indian politics. As in the general election, Congress was decimated, and risks sliding into oblivion under mother-son duo Sonia and Rahul Gandhi.

“Today is likely to be both a BJP win and a funeral of a 150-year-old party,” said investment manager and columnist Surjit Bhalla, referring to the organisation founded in 1885 and led by the Nehru-Gandhi dynasty for four generations.

REFORM BOOST

Modi has already seized on exit polls giving the BJP a clear lead to shake up his economic team, replacing the top civil servant at the finance ministry and hiring U.S.-based economist Arvind Subramanian as his chief economic adviser.

His government on Saturday scrapped diesel price controls and raised the cost of natural gas, giving market forces greater sway as it seeks to attract energy investment, boost competition and cut subsidy costs.

Senior government officials say Modi may soon beef up the cabinet he formed at the end of May to ease pressure on heavyweights like Arun Jaitley, who holds both the finance and defence portfolios.

Jaitley, recovering from a stomach operation, has his work cut out drafting an annual budget to encourage business investment and revive Asia’s third largest economy from a prolonged slowdown by February.

BJP leaders were due to meet on Sunday to consider whether to team up in Maharashtra with the regional Shiv Sena party, which is still part of its national coalition. The two fell out during the state campaign.